Larry Catá Backer's comments on current issues in transnational law and policy. These essays focus on the constitution of regulatory communities (political, economic, and religious) as they manage their constituencies and the conflicts between them. The context is globalization. This is an academic field-free zone: expect to travel "without documents" through the sometimes strongly guarded boundaries of international relations, constitutional, international, comparative, and corporate law.

Wednesday, May 17, 2017

Interview with Mehr News (Iran): On the Strategic Importance and Ramifications of China's One Belt One Road Initiative

I was recently interviewed by Payman Yazdani for Mehr News Agency (Iran). We discussed the strategic importance and ramifications of China's One Belt One Road (OBOR) Initiative, with an emphasis on its significance for Turkey and Iran.

China's dramatic success in reviving the Silk Road dramatic / the role of Iran and Turkey

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1-What is the strategic importance of Silk Road for China?

The
Silk Road, or better said, China’s One Belt One Road Initiative (OBOR, is profoundly
important on several levels.

First, OBOR
provides a integrated infrastructure framework that hard wires trade along key
routes.That is a critical difference
between the OBOR plan and the patterns of conventional globalization.Conventional globalization is not guided by
an overall plan directed by a powerful state at the center of trade; OBOR does
just that.

Second, that
guidance has consequences.The principal
one, of course, is that the infrastructural framework of OBOR is centered in
and through China.That makes perfect
sense from the Chinese perspective, of course.But it has distinct ramification for China’s partners that must be
carefully considered.

Third, OBOR is
vitally important not just in and of itself, but as part of a much larger
strategy to move China to the forefront of international finance and
trade.OBOR is likely to serve as a
means through which financial transactions begin to move decisively from the
U.S. Dollar as the transactional currency of choice to the Chinese RMB.
Eventually, I suspect, the goal, often stated by China itself, is to displace
the U.S. Dollar as the paramount reserve currency in favor of a basket of
currencies in which the RMB will have a significant weight.

Fourth, OBOR will
produce substantial geopolitical consequences.It was telling for example, that OBOR may have an effect on the balance
of relations between India and Pakistan—as China tilts its infrastructure and
trade relations among them.India has
become sensitive, for example, to Chinese influence in a key Pakistani port
development. That may serve to push India closer to the U.S. or to Russia.

Fifth, OBOR
suggests a new kind of globalization—what I have called piecemeal
globalization.OBOR is structured as an
aggregated set of bilateral arrangements among its sixty-five or so
partners.That approach provides a
measure of flexibility in the details of the arrangements along the Silk Road,
but it also positions China as the arbiter of the core principles of trade
embedded in each of these arrangements. The result might also be to shift the conceptual
center of trade frameworks from the West to China.

Sixth, OBOR
provides a basis for the “next stage” in China’s program of socialist
modernization,.It provides a basis
through which Chinese SOEs may more effectively project economic power in trade
and investment relations abroad, under the guidance of state policy directed
toward meeting China’s macro-economic objectives.

Seventh, OBOR also
represents a new form of coordinated trade and finance policy.OBOR is successful precisely because it is
embedded in a much larger project supported by Chinese development and
infrastructure banks, targeted programs of sovereign lending, strategic
alliances with key private partners aboard, and substantial state to state
interactions, all aimed to produce a singular overall goal. The realization of
substantial trade and commerce with China at its center is merely the
manifestation of that goal which is to accelerate Chinese internal economic
development and also to project China to the forefront of influence in global
affairs.Even if OBOR is only partially
successful and eventually embedded in larger global projects, I believe it will
have contributed greatly to meeting this objective, one way or another.

2-How much is the
possibility of China success in reviving the ancient Silk Road project?

My
personal opinion is that to some significant extent, China has already achieved
a measure of success in reviving the old “Silk Road” through its OBOR
Initiative.Indeed, The OBOR summit held
in Beijing the weekend of May 13 sent a strong signal that, at least with
respect to its core partners, China has already put in place the framework along
a significant part of the old routes. OBOR has been slowly gaining momentum
since its announcement in 2013.With additional
infrastructure projects on line in the next several years, and with the
operationalization of the water routes, OBOR will be fully operational in a few
years.There is a caution here.While OBOR will likely succeed, it is
possible that its eventual shape and characteristics may look quite different
as it is finalized. OBOR is not implemented in a vacuum.China’s traditional economic competitors, as
well as emerging competitors, particularly India and soon Iran, will likely
change the shape of OBOR, or embed OBOR in larger trade relations in ways that
is hard to predict now.And it is always
useful to recall the power of the competitor approaches to multilateral trade
and trade flows, nicely articulated in instruments like TTP.While the U.S. officially withdrew form TTP,
it appears that the other TTP partners may be pushing the project along.More importantly, the United States may
itself engage in in its own OBOR style piecemeal multilateralism using TPP as a
framework for country to country deals.

3-Will Europe and the other countries alongside this road contribute
and join to this project?

It is
clear that Europe cannot ignore OBOR.Certainly one already sees E.U. Member States on the Eastern frontier of
that institution already signaling willingness to engage.It is not clear, however, how that engagement
will manifest.Unlike China’s Asian
partners, European states will be constrained both by the rules of the E.U.
with respect to trade (internal and external) and also with the E.U.’s
sometimes complicated relations with the U.S.Despite that, the Silk Road will reach from Beijing to London in one
form or another. The more interesting question, though, will be the way that
Africa and Latin America will eventually figure into these pathways. These will
have to form a “New” Silk Road.But that
is a project for the future.

4-What can be the role of Turkey in reviving the road?

For
many years after 1989, many believed that Turkey was the key to Central
Asia.That promise was not fully
fulfilled, though there has been movement in that direction in some
sectors.More importantly, of course, is
Turkey’s geographic position.That alone
will make Turkey an important element in any OBOR strategy.But it would be lamentable if Turkey merely
served as a conduit of trade.And
perhaps Turkey is already moving to become a more active agent of trade and
finance.Earlier this year Turkey
signaled a new intent to be more aggressive in markets through its state-owned
enterprises when it folded them into Turkey’s sovereign wealth fund.The resulting financial conglomerate of
operating companies may prove to be an important instrument of Turkish
involvement in trade.To that end, China
may provide more useful guidance than the West, if only because of China’s
focus on its own SOEs and SOE based trade.And, indeed, OBOR offers an alternative model for state based trade
structures that may appeal to developing states.

5- Couple of month ago Turkish foreign minister after visiting his
British counterpart said that Ankara is going to connect Beijing to London.
What can be the role of the UK in reviving Silk Road?

Before
Brexit, I would have been more skeptical.But Brexit will likely make the U.K hungrier for trade and trade relations.While the U.K. will certainly seek to tilt
toward its old commonwealth, and focus on re-developing relations throughout
its old colonial empire (a sort of Western style U.K. OBOR), the U.K. would
profit even more as a center of financial operations—whether of Dollars or
Chinese RMB.Thus for the U.K., like
Turkey, there are two aspects that might be worth considering.The first is the actual trade routing of
goods—and the role each will play in contributing to the manufacturing of those
goods along the “Silk Road”. But as important perhaps is the financing and
investment flows that will accompany OBOR flows of goods. The “connection” that
the Turkish minister referenced, then, might include not just production chains
and flows of goods, but also flows of money and investment.Turkey and the U.K., in very different ways
could play important roles.And both
appear to be gearing up to stake a place in this new order.Lastly, both Turkey and the U.K. offer
substantial connectivity.For Turkey, the
connectivity is between OBOR and Russia; for the U.K., it may be tween OBOR and
the United States.To the extent each of
these states can embed themselves in both emerging structures of global trade
and finance, their importance (and profit) would increase.

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All essays are (c) Larry Catá Backer except where otherwise noted. All rights reserved. The essays may be cited and quoted with appropriate reference. Suggested reference as follows: Larry Catá Backer, [Essay Title], Law at the End of the Day, ([Essay Posting Date]) available at [http address].

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Globalization: Law and Policy will include an integrated bodyof scholarship that critically addresses key issues and theoretical debates in comparative and transnational law. Volumes in the series will focus on the consequential effects of globalization, including emerging frameworks and processes for the internationalization, legal harmonization, juridification and democratization of law among increasingly connected political, economic, religious, cultural, ethnic and other functionally differentiated governance communities. This series is intended as a resource for scholars, students, policy makers and civil society actors, and will include a balance of theoretical and policy studies in single-authored volumes and collections of original essays.

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About Me

I hope you enjoy these essays. Each treats aspects of the relationship between law, broadly understood, and human organization. My essays are about government and governance, based on the following assumptions: Humans organize themselves in all sorts of ways. We bind ourselves to organization by all sorts of instruments. Law has been deployed to elaborate differences between economic organizations (principally corporations, partnerships and other entities), political organization (the state, supra-national, international, and non-governmental organizations), religious, ethnic and family organization. I am not convinced that these separations, now sometimes blindly embraced, are particularly useful. This skepticism serves as the foundation of the essays here. My thanks to Arianna Backer for research assistance.